BRUSSELS, March 30 (Xinhua) -- The hard question during Brexit talks will be what about both sides are prepared to give up, said Maria Demertzis, deputy director of the Brussels-based think tank Bruegel.
Commenting on the outcomes of the European Union (EU) summit last week, Demertzis told Xinhua in an exclusive interview recently that any credible progress would be one in which the issue of Northern Ireland is resolved.
"This will be the sole criteria of what would be a credible progress because unless the Northern Island issue is resolved, it's very difficult to see what type of trade agreement we will have. I think the two are very closely interlinked," she said.
During the summit, EU27 leaders endorsed guidelines for the second phase Brexit talks and a transitional deal agreeing a contentious "backstop solution" keeping Northern Ireland signed up to EU rules in order to avoid a hard border with the Republic of Ireland.
Suggesting "you can't have both ways," Demertzis said if Northern Island is kept in the customs union without the rest of Britain, it would mean a hard border on the sea.
"I don't see how this can work unless something is done in the direction of a virtual border. Everything is being done digitally, but even that I'm not entirely sure how workable it is," she said.
Given the green light by EU27 leaders during the two-day summit, the guidelines were widely seen as a starting point for EU-Britain future relationship talks.
Local media widely expected that the talks' starting point would be Comprehensive Economic and Trade Agreement (CETA)-type, i.e. the "Canadian" model, or European Economic Area (EEA)-type, the Norwegian model.
A CETA-type trade deal offers relatively limited access in services, with no passporting rights for financial services -- an important sector for Britain.
On the other hand, an EEA-type agreement would give Britain much of what it is looking for in trade, including passporting rights for financial services. But it also requires free movement of labor -- a demand that Britain is not willing to accept.
"I think the UK would prefer to start from a CETA agreement and then add to it something for financial services ... I think the UK will capitulate at some point and probably try and arrange something along the lines of what the EU asks," said Demertzis.
"But again that's going to be a difficult thing to sell at home (in Britain). You might create domestically some political instability," she noted, adding that "the EU would prefer something much closer to what we have right now."
The final results would be determined only by the threat of a very hard Brexit close at the time, she noted.
"Typically how the EU works -- always on the last minute it notches up a deal. I hope it's a good economic deal but I think that at some point the UK is going to have sort of putting a lot of water in the wine and accept that for economic gains they need to abide by the EU legislation," said the economist.
To Demertzis, the best outcome for the future relationship would be something like the EEA but at the same time allowing for the fact that Britain won a referendum on limiting the movement of labor.
"Economically it's a good outcome and it allows the UK to declare a victory at home by saying that we have restricted the movement of labor, which is the whole point of this referendum," she said.
In addition, the EEA-minus agreement also implies that the EU is ready to accept that the four freedoms (free movement of goods, services and capital and labor) are not unbreakable, she said.
"That is difficult but in my view the EU need to accept that because you have a country that is leaving. They (British people) have the right to determine this. At the same time, they do not destroy the economic relationships that we have established after 50 years of cooperation, so that I think would be the best outcome ought to be," she said.
